HDB_2Q21 Results

HDB reported 2Q21 PATMI of VND1.6 tn (-1% QoQ/+28% YoY). The YoY increase was driven by high interest income and robust fee income growth. In 1H21, HDB’s PATMI was VND3.1 tn (+48% YoY), fulfilling 59% of our 2021E forecast.

Details

Loan growth increased by 7.6% YTD to reach VND192 tn.

2Q21 net interest income was VND3.5 tn (+3% QoQ/+25% YoY).

Annualized NIM was 4.6% in 2Q21 (+8bps QoQ/ -42bps YoY). 1H21 net interest income was VND6.8 tn (+21% YoY).

2Q21 net fee income was VND544 bn (+74% QoQ/ +283% YoY). 1H21 net fee income was VND857 bn (+186% YoY). The details are unclear, but we believe that banca sales were the key driver.

2Q21 Opex was VND1.7 tn (+3% QoQ/+49% YoY), and 1H21 Opex was VND3.3 tn (+21% YoY).

2Q21 provisioning increased by +9% QoQ/+17% YoY to reach VND478 bn. In 1H21, total provisioning was up +31% YoY to reach VND914 bn.

LLR ratio was 88% (+19ppt QoQ/+16ppt YoY) in 2Q21. The bank’s reported 2Q21 NPL ratio was 1.21% (-30bps QoQ/-34bps YoY).

CASA was only 10.5% as at 2Q21 (-60bps QoQ/-1.8ppt YoY).

Our view

We expect fee income, especially bancassurance fees, to be the key driver for HDB’s earnings in 2H21. Also, a potentially renegotiated bancassurance exclusivity deal could help boost HDB’s earnings further in 2021E and beyond.

Increased LLR is a positive. HDB’s asset quality remains solid with a relatively low NPL ratio, and the increased provisioning is a prudent approach that has resulted in significantly higher loan loss coverage. This is positive, but we expect the bank to further increase its LLR ratio to prepare for the realization of asset quality deterioration in the context of the pandemic.

HDB’s shares trade at 1.9x 2021E P/B, which is in line with the sector median, given its better operating results than the sector median.  However, the current price is 6% above our target price, and we would recommend to wait for a pullback.

For the complete report, please access here: HDB_2Q21_Results highlights

Analyst: Tanh Tran, tanh.tran@yuanta.com.vn